The inclusion of a herding propensity is especially interesting since it is suspected to be an important factor in many past financial crises. Within this class of models, herding induces bubbles and crashes and the price-return data display power-law behaviour in the tails with exponents closely matching those observed in real markets. Furthermore, since the herding behaviour can be introduced into an otherwise efficient-pricing market, a direct causal relationship between herding and fat-tails can be established. We shall conclude by considering possible causes of volatility clustering and outlining a mathematical approach for quantifying such deviations from the traditional rational expectations assumption.

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